The State of Sparkling Wine - January 2026
The State of Sparkling Wine: Market Dynamics Behind Rack & Riddle's Lodi Closure
Executive Summary
Rack & Riddle's January 2026 announcement to close its Lodi facility and consolidate operations in Sonoma County represents a strategic response to fundamental shifts in the sparkling wine market and broader wine industry headwinds. While sparkling wine remains the sole growth segment in an otherwise declining US wine market, the decision reflects regional competitive dynamics, production efficiency imperatives, and Lodi's particular vulnerability to structural challenges facing California's inland wine regions.
This analysis examines four interconnected dynamics: the resilient yet evolving US sparkling wine market; California's production landscape and competitive positioning; Lodi's specific role in wine grape supply chains; and how these trends diverge from the broader wine industry's unprecedented contraction.
Background: Rack & Riddle's Strategic Realignment
Healdsburg-based Rack & Riddle, the leading custom sparkling wine producer in the United States with 3.5 million cases of annual capacity, announced on Tuesday, January 21, 2026, a "strategic facility realignment" that will permanently close its Lodi operations by the end of May 2026. The facility at 1 Winemaster Way, acquired from Weibel Family Winery in July 2023 for an undisclosed sum, represented Rack & Riddle's expansion into high-volume Charmat method production.
90,000 square feet of production space
2.1 million gallons of cooperage with tanks up to 62,000 gallons
Capacity to produce 1.1 million cases of Charmat sparkling wine annually
Approximately one-third of Rack & Riddle's total production capacity
Mark Garaventa, Rack & Riddle's COO and General Manager, framed the decision in operational terms: "While this facility supported near-term growth following an earlier acquisition, operating at a distance from our core sparkling operations created inefficiencies and no longer aligns with our long-term business strategy." The consolidation centers on developing a "Sparkling Innovation Park" (SIP) embedded within the Healdsburg site, bringing Méthode Champenoise, Charmat, and in-line carbonation capabilities under one roof while maintaining operations in Alexander Valley and Geyserville.
The timing, however, tells a more complex story. The closure comes barely 30 months after acquisition and amid unprecedented crisis conditions for California grape growers, with Stuart Spencer, Executive Director of the Lodi Winegrape Commission, characterizing conditions as "a bloodbath for all grape growers across California."
The US Sparkling Wine Market: Growth Amid Contraction
Market Performance and Consumer Adoption
Sparkling wine stands as the sole bright spot in an otherwise troubled American wine landscape. While total US wine sales declined 5% to approximately 329 million cases in 2025—continuing a multi-year contraction—sparkling wine demonstrates persistent resilience with volumes 27% above 2019 levels despite a modest 2% decline in 2024.
Consumer participation metrics reveal structural adoption rather than temporary enthusiasm. The proportion of Americans who drink sparkling wine reached 27% of the legal drinking age population in 2025, up from 21% in 2019. More significantly, monthly consumption frequency jumped from 56% to 72% between 2019 and 2022, indicating sparkling wine's evolution from celebration-specific to everyday consumption.
Figure 1: The US wine market shows overall volume decline while sparkling wine demonstrates resilience with growth indexed to 2019 baseline
The category now represents approximately 14% of wine bottles sold in the United States—effectively "one in every seven bottles"—while accounting for 20% of global wine sales value despite comprising only 7% of production volume. This value premium reflects both Champagne's luxury positioning and the growing premium Prosecco segment priced between $13-$17.99, which captures 39% of the sparkling wine market.
Prosecco's Ascendancy and Champagne's Challenges
The most dramatic shift within sparkling wine involves the competitive repositioning between Italian Prosecco and French Champagne. In the first seven months of 2025, Prosecco captured 30% of US sparkling wine market share by both volume and value, surpassing Champagne's 28%—a historic reversal that would have been unthinkable just three years ago.
Figure 2: Prosecco surpassed Champagne in US market share in 2025, reflecting consumer preference for accessible, affordable sparkling wines
Prosecco's trajectory demonstrates explosive growth: from near-zero presence 15 years ago to $531 million in US sales in 2024, representing a 178% increase over seven years. The Italian sparkling now accounts for 31% of all Italian wine sales in the United States, with penetration reaching 27% among Millennials and 60% female representation among consumers. Critical to its success, Prosecco achieves superior purchase conversion despite lower brand awareness—31% of aware consumers purchase Prosecco versus 24% for Champagne, even as Champagne maintains higher recognition at 52% versus 40%.
Price accessibility drives this divide. With average retail prices around $19.50 per bottle, Prosecco delivers perceived value that resonates with budget-conscious consumers facing inflation, while Champagne's premium positioning (often $40+) faces pressure during economic uncertainty. Champagne volumes declined 5% in 2024 and faced a 9.2% global decline, with European markets showing particular weakness as consumers trade down to Crémant and Prosecco alternatives.
Demographic and Occasion Shifts
Sparkling wine's growth reflects fundamental changes in how younger consumers approach wine. Gen Z participation in wine increased from 9% to 14% of wine-buying households over two years, with lighter styles—particularly sparkling and rosé—serving as primary entry points. These cohorts no longer reserve sparkling exclusively for celebrations; Prosecco and flavored sparkling wines accompany takeout on "ordinary Tuesdays," with 40% of production at progressive wineries now dedicated to sparkling, rosé, or white wines.
This casualization expands consumption occasions while creating vulnerability to competition. Wine now competes not just with beer (19%) and spirits (18%) in Gen Z restaurant orders (wine: 21%), but with hard seltzers, RTDs, and THC-infused beverages that offer simplicity and health-conscious positioning. The "sober curious" movement further pressures frequency, even as those who do drink demonstrate willingness to premiumize individual purchases.
California Sparkling Wine Production: Scale and Competition
Production Landscape and Regional Specialization
California dominates US sparkling wine production, accounting for approximately 70% of domestic sparkling wine and 81% of all US wine production. The state produces roughly 150 million bottles of sparkling wine annually—half of Champagne's 300 million bottle output but representing substantial scale.
Concentration exists within California, with Sonoma County (particularly Russian River Valley, Carneros, and Sonoma Coast AVAs) and Napa Valley establishing quality reputations through optimal climate for Chardonnay and Pinot Noir—the classic Champagne grapes. More than 300 California wineries produce sparkling wine across a spectrum from bone-dry to sweet, employing both Méthode Champenoise (traditional bottle fermentation) and Charmat (tank fermentation) methods.
The past 10-15 years witnessed a "grower-producer revolution" with emergence of precise, single-vineyard sparkling wines that emphasize terroir expression rather than branded consistency—mirroring earlier trends in Champagne. Major established houses include both French-owned operations (Domaine Carneros by Taittinger, Roederer Estate, Mumm Napa) and domestic specialists (Schramsberg, Iron Horse, Gloria Ferrer, J Vineyards).
The Lodi Supply Connection
Lodi's role in California sparkling production remains substantial yet largely invisible to consumers. The region supplies "tons and tons" of Chardonnay and Pinot Noir to coastal sparkling wine producers in Napa Valley and Sonoma County, including brands owned by French Champagne houses. This supply relationship exists because Lodi's Mediterranean climate, when grapes are harvested in late July (six to eight weeks before table wine harvest), produces fruit with the high acidity and low sugar essential for sparkling wine production.
Lodi's Sparkling Wine Specialization
Only a "minuscule percent" of Lodi's Chardonnay and Pinot Noir production goes to local sparkling wine producers. Instead, Lodi specializes in sparkling wines from non-traditional varieties: Grenache, Carignan, Albariño, Verdelho, Barbera, Zinfandel, Graciano, Assyrtiko, Picpoul, Clairette, and Bacchus.
Local producers including LVVR Sparkling Cellars (the only exclusively sparkling-focused winery), Nostra Vita, Peltier Winery, and Michael David Winery produce traditional method sparkling wines that emphasize fruit-forward profiles while maintaining champagne-style yeasty characteristics from extended lees aging.
This dichotomy—bulk grape supplier to coastal brands, boutique producer of alternative varietals locally—positions Lodi awkwardly as demand shifts. The region's sparkling wine production represents an infinitesimal fraction of its total output, with perhaps 5-10 wineries among 85 producing any sparkling wine at all. Rack & Riddle's Lodi facility primarily served as high-volume Charmat production for private label and custom brands rather than Lodi-sourced wine, further disconnecting the facility from regional terroir narratives.
Lodi's Wine Industry Crisis: A Region Under Pressure
Production Scale and Economic Significance
Lodi represents California's largest wine grape growing region by volume, crushing approximately 20.5% of all California wine grapes—over 750 growers farming between 82,000 and 110,000 acres (figures vary by source and timing). To contextualize this scale: Lodi crushes more grapes than Napa Valley and Sonoma County combined, with Napa producing just 4% of California wine.
| Region | Production Share | Vineyard Acreage | Commercial Wineries |
|---|---|---|---|
| Lodi | 20.5% of CA wine | 82,000-110,000 | 85 |
| San Joaquin County | Largest CA county by acres | 68,475 | Multiple |
| Napa Valley | ~4% of CA wine | ~45,000 | 1,400+ |
| Sonoma County | ~3% of CA wine | ~60,000 | 1,800+ |
This production feeds America's value wine segment. Approximately 12% of all wine sold in the United States (including imports) originates from Lodi-grown grapes, though many bottles label as "California" rather than "Lodi" appellation. The region supplies grapes to the largest domestic wine producers—E. & J. Gallo, The Wine Group, Constellation Brands, Trinchero Family Estates—whose business models depend on economies of scale to serve the under-$12 price segment.
Lodi's diversity extends to 135-136 commercially grown wine grape varieties, more than any US wine region, enabled by Mediterranean climate and varied soil types. While Zinfandel remains iconic, the region leads California production of Cabernet Sauvignon, Merlot, Chardonnay, and Sauvignon Blanc.
Unprecedented Contraction and Structural Challenges
The past three years inflicted catastrophic damage on Lodi's wine economy. The region lost approximately 15-20% of vineyard acreage, with 8,000 acres removed in 2024 alone—representing 10% of vines and more than any other California region. This translates to nearly 25% reduction in grape production over two years, with fourth-generation farmer Randy Baranek stating he has "never seen conditions this bad."
Industry Assessment: "A Bloodbath"
Stuart Spencer, Lodi Winegrape Commission Executive Director: "It's a bloodbath for all grape growers across California. It is the worst market condition growers have seen in their lifetime, with farmers in their 80s telling me they have never seen it this bad before."
The 2024 harvest saw thousands of acres left unpicked as growers faced prices below production costs—typically $3,000 or less per acre revenue against $3,000-$4,500 in farming costs.
Three interconnected crises drive this collapse:
1. Demand Destruction in Core Segments
Lodi's concentration in value-priced wines (under $12) exposes it maximally to the segment experiencing steepest declines. These wines face triple pressure: overall wine consumption declining, premiumization shifting dollars toward $15+ bottles, and younger consumers avoiding wine entirely in favor of hard seltzers, craft beer, or abstention.
2. Bulk Wine Import Competition
Large California wineries—Lodi's primary grape buyers—increasingly import cheap bulk wine rather than purchase local grapes. Bulk imports surged 17% in the first six months of 2025 to over 25 million gallons, equivalent to 150,000 tons of wine grapes. Over five years, 1.7 million tons of wine-equivalent have been imported, representing $28 billion in lost California economic activity.
Australian bulk wine, priced at $2.65 per gallon, dramatically undercuts California grape costs. A federal duty drawback loophole since 2004 allows importers to reclaim duties on exported wine, effectively incentivizing imports over domestic sourcing. Federal law permits wine labeled "American" to contain up to 25% foreign wine, masking the substitution from consumers.
Bulk imports: 25M+ gallons in first half 2025
Equivalent grape supply: 150,000 tons
5-year imports: 1.7 million tons wine-equivalent
Lost CA economic activity: $28 billion
Australian bulk wine price: $2.65/gallon
Duty drawback loophole: Active since 2004
3. Corporate Consolidation and Monopsony Power
Lodi's grape market differs fundamentally from Napa or Sonoma. Where coastal regions feature numerous small wineries and direct-to-consumer models, Lodi growers depend overwhelmingly on contracts with a handful of corporate buyers. Mondavi's Woodbridge facility, Constellation's operations, and The Wine Group's production concentration create monopsony conditions where buyers dictate terms.
Recent consolidation intensified this power imbalance. Constellation sold Woodbridge to The Wine Group in 2024; earlier, Constellation had acquired Mondavi in a 2004 billion-dollar deal. As brands concentrate under "the same handful of larger companies," growers lose negotiating leverage and alternative outlets. When these corporations decide to import rather than source domestically, individual growers have no recourse.
Grower Responses: Exit and Adaptation
Many Lodi families are abandoning winegrape production after generations. Jason Smith closed his 50-year-old Valley Farm Management business in Monterey County, once farming 3,200 acres with 50 employees, after watching contracts evaporate and prices fall below breakeven. Kevin Phillips converted vineyards to almond orchards, noting "With grapes you have to build relationships with wineries and hope everything works out...With almonds there's always demand—you don't need to call anyone."
This crop substitution carries profound economic implications. Grape growing employs significantly more workers than almond production, which relies on mechanization. The shift from labor-intensive viticulture to automated tree crops threatens Lodi's employment base and community fabric built around multi-generational farming families.
For growers who remain, quality improvements offer little benefit. "The [Lodi growers] have to have higher yields to make a profit, and they're not getting any extra money for quality," Spencer explains. "So the only way to make more money is to grow more grapes. It drives supply up and prices down." This trap—produce more to compensate for low prices, thereby further depressing prices—creates a race to the bottom incompatible with premium positioning.
The 85 commercial wineries in Lodi attempt to build direct-to-consumer channels and appellational identity, establishing a "Lodi Winery Business Improvement District" with 1.5% tasting room assessments to fund marketing. Yet tourism remains modest compared to Napa or Sonoma, and many tasting rooms report 30% visitation declines.
Overall Wine Market Trends: The Context for Sparkling's Divergence
Historic Decline Across Core Wine Categories
The American wine industry faces its most severe contraction since Prohibition, with 2025 representing an inflection point from temporary disruption to structural decline. Total US wine sales fell to approximately 329 million cases in 2025, down from 335.9 million in 2024 and 377 million in 2023—a cumulative 13% contraction in two years. Market value declined to $74.3 billion from $75.5 billion despite persistent inflation that should have driven nominal growth.
California, producing 80% of US wine, experienced production collapse from 636 million gallons in 2020 to 508 million in 2024, then projected to fall further as the 2025 crush reached a 25-year low below 2.5 million tons. This compares to mid-2010s averages near 4 million tons. Excess inventory reached crisis levels: 84 million cases—enough to fill over 10,000 Olympic swimming pools—representing 30% oversupply beyond optimal levels.
| Year | US Wine Cases (Millions) | CA Production (Gallons) | Market Value ($B) |
|---|---|---|---|
| 2019 | 371 | 636M | $82.4 |
| 2020 | 343 | N/A | N/A |
| 2021 | 354 | N/A | N/A |
| 2022 | 337 | N/A | N/A |
| 2023 | 335.9 | 508M | $75.5 |
| 2024 | 335.9 | N/A | $75.5 |
| 2025 | 329 | N/A | $74.3 |
The financial toll manifests in winery closures. The US lost 1.5% of wineries in 2024, the first decline in over 20 years, with California shedding 222 commercial operations. Notable casualties include Newton Vineyards, Edmund St. John, Carlisle, and Brendel, while others sold facilities hoping to preserve brands. Mergers and acquisitions totaled $2.6 billion in 2024, down from $3.0 billion in 2023, as distressed asset sales and consolidation accelerated.
Vineyard removals exceeded 38,000 acres in California between October 2024 and August 2025, with projections of continued 35,000-40,000 acre annual removals through 2026. Even Sonoma County removed 10% of vineyard acreage, approximately 2,000 acres unlikely to be replanted. Bulk wine prices collapsed from $30-40 per gallon in early 2023 to $10-15 currently, with some wines unsaleable at any price.
Structural Drivers: Demographics and Competition
Four interconnected forces drive wine's structural decline, with sparkling wine partially insulated from but not immune to each:
1. Generational Replacement and Moderation
Baby Boomers, who drove three decades of wine growth, are aging out of peak consumption years while Millennials and Gen Z drink significantly less wine. Only 16% of Americans aged 21-34 would bring wine to a party versus 58% of those 65+. Alcohol consumption overall reached a 90-year low, with Millennial and Gen Z participation down 10% and 9% respectively since 2023.
This shift reflects more than preference—it embodies values transformation. Younger consumers prioritize health and wellness, practice moderation ("sober curious" movement), and find wine's complexity and tradition less appealing than accessible alternatives. When they do drink wine, they favor lighter styles (whites, rosés, sparkling) over reds, and seek transparency about ingredients and production methods.
2. Alternative Beverage Competition
Wine competes in a fragmented marketplace against craft beer, premium spirits, hard seltzers, RTDs, and emerging THC-infused beverages. Hard seltzers surged on perceived health benefits (lower calories, gluten-free) despite questionable nutritional superiority. Spirits gained market share for 13 consecutive years, reaching 42.1% of alcohol sales versus wine's declining share.
Cannabis beverages, priced higher but positioned as "more natural" with no hangover effects, particularly resonate with Millennials and Gen Z. These alternatives share common advantages: simplicity (no wine knowledge required), convenience (ready-to-drink), and modern branding unconstrained by tradition.
3. Premiumization Masks Volume Collapse
A paradox defines current wine economics: volume plummets while value grows modestly. The top 25% of wineries enjoyed 22% revenue growth in 2024; the bottom 25% saw 16% declines. Wines priced $15-$30 perform best, while under-$12 wines face catastrophic losses.
This bifurcation reflects consumers drinking less but spending more per bottle, seeking quality over quantity. Premium wines (over $20) increased market share 8% in 2024 while sub-$10 wines lost 6%. Organic and biodynamic wines grow 28% annually, appealing to health-conscious consumers.
Premiumization benefits Napa, Sonoma, and luxury brands while devastating value-focused regions like Lodi. It also creates illusion of health—total market value remained relatively stable—masking underlying volume crisis that determines grape demand.
4. Anti-Alcohol Messaging and Regulatory Pressure
Public health campaigns against alcohol consumption, particularly targeting younger demographics, reshape social acceptability. Organizations worldwide advocate reduced consumption, with some governments considering dietary guideline changes that would categorize alcohol alongside cigarettes as substances without safe consumption level.
This cultural shift, amplified through social media and wellness influencers, normalizes abstention and positions moderate drinking as health-conscious rather than standard. Wine's historical positioning as sophisticated and cultured offers little defense against medical evidence of health risks.
Why Sparkling Wine Diverges
Sparkling wine's resilience amid broader collapse stems from five factors:
Factors Supporting Sparkling Wine Resilience
- Occasion Expansion: Evolution from celebration-only to everyday consumption creates frequency growth independent of premium wine dinner occasions that have declined
- Demographic Alignment: Lighter, lower-alcohol profiles match younger consumer preferences better than heavy reds
- Prosecco Accessibility: $15-20 price points deliver premium experience without luxury intimidation
- Versatility and Mixology: Increasing use in cocktails extends consumption occasions and simplifies wine knowledge requirements
- Value Perception Stability: Production method barriers protect domestic producers from cheapest foreign competition
Yet sparkling wine is not immune. The 2% volume decline in 2024, while modest compared to 5%+ overall wine declines, signals that demographic and competitive pressures affect all alcohol categories. Champagne's struggles demonstrate that premium positioning alone cannot overcome economic headwinds and Prosecco competition.
The projected 2.69% CAGR for sparkling wine through 2031 appears optimistic given these headwinds. More likely: sparkling continues outperforming still wine but faces decelerating growth, with success increasingly concentrated in premium ($20+) traditional method producers and affordable Prosecco/Cava, squeezing mid-tier domestic sparklers.
Sparkling Wine Production in Lodi: Marginal and Opportunistic
Quantifying Lodi's Sparkling Wine Footprint
Determining the precise percentage of Lodi grapes or wineries dedicated to sparkling wine proves challenging due to data limitations, but available evidence establishes parameters:
Grape Production
- Lodi supplies substantial quantities of Chardonnay and Pinot Noir to coastal sparkling wine producers, described as "tons and tons" by industry sources
- However, only a "minuscule percent" of Lodi's Chardonnay and Pinot Noir production goes to local sparkling wine production
- Estimated 1-2% of Lodi's total vineyard acreage (1,000-2,000 acres) likely supplies grapes for sparkling wine
Winery Production
- Among 85 commercial wineries in Lodi, only a handful produce sparkling wines
- Identified producers include: LVVR Sparkling Cellars (exclusively sparkling), Nostra Vita Family Winery, Peltier Winery, Michael David Winery, Lorenza Cellars, Markus Wine Co., and McCay Cellars
- Represents approximately 5-8% of Lodi wineries producing any sparkling wine
- Only LVVR focuses exclusively on sparkling wine using traditional Méthode Champenoise
Production Volume Context
- Rack & Riddle's Lodi facility produced 1.1 million cases of Charmat sparkling wine annually—dramatically more than all local Lodi wineries combined
- However, this production used grapes from varied sources for private label/custom brands rather than Lodi-grown, Lodi-labeled wine
- Local Lodi sparkling producers operate at boutique scale, measured in thousands of cases rather than millions
Strategic Positioning and Market Niche
Lodi's sparkling wine strategy diverges fundamentally from both its bulk grape supply role and from California coastal competition. Local producers embrace non-traditional varieties that ripen well in warmer climates while retaining natural acidity: Grenache, Carignan, Albariño, Verdelho, Barbera, Zinfandel, and obscure Mediterranean varieties like Assyrtiko, Picpoul, Clairette, and Bacchus.
This approach makes viticultural sense. These varieties evolved in warm Mediterranean climates (Spain, Italy, Greece) where they developed acid retention mechanisms unnecessary in cooler regions. When harvested early in late July at 17-18° Brix with pH under 3.1, these grapes produce sparkling wines with bright acidity, lower alcohol (10-12% ABV), and distinctive varietal character.
The resulting wines occupy a unique market position: fruit-forward yet dry, expressive yet structured, offering alternatives to Chardonnay/Pinot Noir orthodoxy. LVVR's Barbera Reserve sparkling, Markus Wine Co.'s Bacchus sparkling, and McCay Cellars' Clairette Blanche represent innovations impossible in appellation-restricted European regions.
Yet this innovation reaches minimal scale. Without critical mass of producers, distributor interest remains limited. Lodi's sparkling wines sell primarily through tasting rooms and direct-to-consumer channels, lacking the wholesale distribution necessary for category-building. The region's reputation for value-priced bulk wine undermines premium sparkling positioning, creating cognitive dissonance for consumers accustomed to associating Lodi with $8 Woodbridge rather than $30+ artisanal sparklers.
Implications and Outlook
The Rack & Riddle Closure as Strategic Retreat
Rack & Riddle's decision to exit Lodi reflects calculated assessment that geographic consolidation outweighs operational diversification. The company acquired Weibel to gain high-volume Charmat capacity meeting demand for Prosecco-style and flavored sparkling wines at accessible price points. Just 30 months later, operating two production hubs 120 miles apart created coordination costs that overwhelmed anticipated benefits.
Three factors likely drove this reversal:
1. Labor and Logistics
Managing separate production teams, quality control, and inventory across distant facilities increases overhead. Consolidating to Sonoma County where three facilities already exist reduces complexity.
2. Market Positioning
Healdsburg and Sonoma County carry premium associations that Lodi cannot match. For custom clients seeking to build brand equity, production location matters for storytelling and perceived quality.
3. Lodi's Deteriorating Ecosystem
The region's vineyard removals, grower distress, and winery closures signal declining long-term viability. Exiting now, while still choosing rather than forced, allows controlled transition.
The decision to add 20-25 new positions in Healdsburg while eliminating 35 in Lodi represents net job reduction, typical of consolidation efficiency gains. For Lodi, losing a major employer in its wine sector compounds already severe economic distress.
Sparkling Wine's Conditional Resilience
Sparkling wine's outperformance relative to still wine should not be mistaken for absolute strength. A 2% volume decline in 2024, following years of growth, may herald inflection toward sustained contraction. Several vulnerabilities warrant attention:
Prosecco Saturation Risk
Explosive growth created crowded competitive space. With 30% market share and 178% growth over seven years, Prosecco may be approaching penetration limits. Further expansion requires either taking share from Champagne (increasingly difficult as premium consumers prove sticky) or converting non-sparkling drinkers (limited by overall wine decline).
Price Pressure Intensification
As bulk wine imports and oversupply depress still wine prices, competitive pressure may eventually extend to sparkling. Charmat method production costs remain significantly lower than traditional method, but margin compression threatens producer viability.
Generational Adoption Uncertainty
While Gen Z shows openness to sparkling wine as gateway category, this cohort drinks less alcohol overall and faces economic headwinds limiting premium purchases. Whether sparkling can maintain frequency and price points amid structural moderation remains unproven.
Alternative Beverage Evolution
Hard seltzers initially boomed then plateaued, but the broader trend toward non-wine alternatives continues. Cannabis beverages, non-alcoholic cocktails, and yet-to-emerge innovations compete for occasions where sparkling wine currently wins.
Lodi's Existential Questions
Lodi faces questions transcending immediate crisis, fundamentally about identity and economic model:
Can bulk production regions survive premiumization?
If value-priced wine demand structurally declines while $15+ grows, regions optimized for efficiency and volume face obsolescence. Lodi's cost structure—high California labor and input costs, regulatory compliance—cannot compete with $2.65/gallon Australian imports for commodity segments. Yet pivoting to premium requires decades building reputation, smaller production reducing economies of scale, and investments growers cannot finance after recent losses.
Does geographic origin matter for value wines?
Consumers paying $30+ care about Napa, Sonoma, or single-vineyard designations. Those paying $10 prioritize brand and price over appellation. Lodi's attempt to build regional identity through marketing assessments and wine tourism fights this fundamental reality. Without premium price realization, investments in place-based branding cannot recoup.
What crops should replace removed vineyards?
Almonds offer higher margins and mechanization benefits but employ fewer people and consume more water. Conversion from perennial wine grapes to tree crops or row crops is expensive (tens of thousands per acre) and irreversible short-term. Multi-generational wine families face wrenching decisions to abandon identities built over 150 years.
The most likely trajectory involves continued contraction—more vineyard removals, more grower exits, consolidation around remaining large-scale operators supplying major brands—until Lodi reaches equilibrium at perhaps 60,000-70,000 acres from current 82,000. This represents job losses in thousands, business closures across supporting industries (trucking, equipment, supplies), and diminished tax base for San Joaquin County.
Some growers will successfully transition to premium production, organic certification, and direct sales. But structural reality limits how many can pursue this path; premium markets cannot absorb all of Lodi's production even if quality matched coastal regions.
California and US Wine Industry Restructuring
The broader California wine industry requires supply reduction estimated at 400,000-500,000 tons of grapes (approximately 40,000-50,000 acres of vineyards) to restore balance between supply and demand. This adjustment, already well underway with 38,000 acres removed in the past year, will continue through 2027-2028 before market stabilization.
Several outcomes appear probable:
Industry Restructuring Scenarios
- Continued Consolidation: Small wineries lacking distribution and capital will close or sell to larger entities. The industry that added wineries annually for 30+ years will shrink to sustainable scale
- Regional Specialization: Napa and Sonoma concentrate on luxury ($50+ bottles) and tourism; Paso Robles and Santa Barbara serve $20-40 segment; Lodi and Central Valley supply bulk for brands under $15
- Import Share Gains: Absent policy changes closing the duty drawback loophole or imposing meaningful tariffs, bulk wine imports will continue displacing California grapes at the commodity level
- Premiumization Plateau: Consumer willingness to trade up has limits. Once premium segments oversaturate, margin compression will pressure even successful wineries
For sparkling wine specifically, California producers must navigate Prosecco's dominance while defending against potential Cava and other accessible sparklers entering US markets. Domestic sparkling faces choice: compete on price (difficult given production costs) or emphasize quality, terroir, and tradition (challenging when Italian imports occupy premium credibility).
The Rack & Riddle consolidation exemplifies rational response to these forces—concentrate where reputation and efficiency align, exit where neither exists, invest in innovation (SIP) to differentiate. Whether Lodi can develop its own differentiated sparkling identity remains deeply uncertain.
Conclusion
Rack & Riddle's closure of its Lodi facility stands as both anomaly and symptom. Anomalous because sparkling wine thrives relative to collapsing still wine markets; symptomatic because even growth segments cannot justify inefficient operations in challenged regions during industry-wide restructuring.
The sparkling wine market demonstrates resilience through consumer adoption, occasion expansion, and successful positioning against alternatives. Yet this success concentrates benefits unevenly—Prosecco and Champagne dominate, coastal California captures premium segments, and high-volume efficiency determines profitability at value price points. Lodi's marginal position in sparkling wine—supplying bulk grapes to others while producing boutique innovations locally—generates neither scale nor scarcity necessary for sustainable advantage.
For Lodi, the closure removes 35 jobs in an economy already hemorrhaging thousands through vineyard removals and grower exits. The region's 20.5% share of California grape production positions it as critical infrastructure for American wine, yet bulk imports and premiumization render this scale increasingly disadvantageous rather than strategic. Whether Lodi can successfully pivot from commodity supplier to premium producer—or must accept radical downsizing to match declining demand—will determine hundreds of families' futures across coming years.
The sparkling wine market's strength relative to overall wine decline offers cold comfort: a rising tide no longer lifts all boats when structural forces create winners and losers based on geography, production methods, and historical positioning. Rack & Riddle's strategic retreat from Lodi signals that even in wine's sole growth category, only the most efficiently positioned will thrive.
References and Sources
This report synthesizes research from industry databases, government statistics, and trade publications. Key sources include:
About This Report
Report Date: January 22, 2026
Research Scope: Comprehensive analysis of sparkling wine market dynamics, California wine industry trends, and regional impacts of strategic facility realignments.
Geographic Focus: Lodi, California wine region; United States sparkling wine market; California wine industry
For questions or additional analysis: info@lodi411.com